Six Ways to Evaluate a Store Assortment

The desire to impress a client with a wide choice is very commendable, but must have reasonable boundaries. How to try to please the customer not to inflate the assortment of the store? How to build an assortment matrix in such a way as to get maximum profit at optimal cost? About these and other aspects of the assortment policy of the store in a series of articles will tell the experts of the Clever Fashion consulting company. This time, fashion marketing professionals share with the readers of the Shoes Report magazine the most effective analysis methods that allow them to evaluate the existing assortment matrix.

The path to optimal assortment

Sooner or later, any business faces a difficult but interesting task: to find a compromise between a wide range that requires significant costs and a limited line of products, which, on the contrary, allows you to free up funds for the development of the company. In this case, you should always remember the relationship between the breadth of the assortment and the cost of production. Analysts say that if the assortment is halved, productivity will increase by one third, and costs and break-even will decrease. And, accordingly, with an increase in the number of items, the opposite situation arises. However, the desire to increase productivity and reduce costs by narrowing the assortment can lead to extremes: too carefully and narrowly selected assortment threatens with poverty and inability to satisfy consumer needs, and as a result, loss of customers and profits.

Where is the line between the optimal assortment and its extreme, inefficient forms? In the ideal case, the assortment is balanced so that it does not require unnecessary costs, but is able to satisfy consumers' needs and maintain their loyalty. As a rule, such a balance is achieved as a result of hard work and accurate calculations, ongoing research, analysis and forecasting of future periods. The task is complicated by the fact that each enterprise and the market situation are unique, and in order to succeed, the company must systematically use analysis tools and effective management. A set of these measures is important, since assortment analysis without a clear strategy will not solve the problem of optimizing business processes. No matter what software and personnel resources the store possesses, it is necessary to effectively set the tasks of analysis and choose the appropriate methods. It is important to diagnose the situation in the store, determine the key problem and solve it today, since tomorrow it will require more expensive measures.

To each according to his needs.

Any assortment analysis should be based on a top-down principle: at the first stages, a study of large commodity blocks is carried out - it allows you to see the main trends; then the product subgroups that make up each block and the product lines by type or brand are sequentially analyzed. This sequence helps to determine how effectively a particular subgroup is located in the sales area and whether it meets the nature of demand in general. Without this top-down approach, efforts to optimize assortment within a product group can be meaningless.

Depending on the tasks and internal conditions, the assortment analysis can be carried out by different methods. Here are the main ones.

Dynamics analysis turnover, profit, average purchase amount and number of purchases. Allows you to identify trends in the development of the store, adjust the range and pricing strategy in the inactive groups.

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Receipt amount and structure analysis. The main objectives of this method are to determine merchandising effectiveness; assess the performance of a retail space; evaluate product assortment and pricing policies by identifying specific customer groups; analyze shopping baskets and identify the most frequently occurring items in receipts. By analyzing receipt amounts and structure, items purchased together also become apparent.

Turnover and Profit Structure Analysis (ABC analysis). This method identifies the most important product groups, subgroups, and brands in a company's overall profit. The method categorizes the entire product range according to three parameters: Category A consists of the most valuable products, which account for 20% of inventory and generate 80% of profit; Category B consists of intermediate-value products, which account for 30% of inventory and generate 15% of total profit. Finally, Category C represents the least valuable products, which account for 50% of inventory and generate 5% of total sales. For the most comprehensive results, it is recommended to conduct this analysis quarterly.

Turnover elasticity analysis identifies product groups that are most sensitive to changes in the market, consumer, and competitive environment. It helps understand the contribution of each product group to increases and decreases in turnover. Turnover elasticity analysis is often applied to sales of seasonal products.

XYZ analysis allows you to assess the stability of sales by product group and forecast consumption patterns in the future. This analysis categorizes all products based on seasonality, shortages, and special sales promotions, dividing them into three categories. Category X includes products with stable sales; Category Y includes products with unstable sales but known demand trends; and Category Z includes products with irregular sales and difficult-to-track demand trends. XYZ analysis helps select methods for managing these groups, determine inventory levels for each category, and determine the frequency of replenishment.

Retail space efficiency analysis is used to address demand for product categories. This analysis evaluates the efficiency of retail space, identifies problem areas and potentially promising merchandising zones. The overall goal of retail space efficiency analysis is to maximize the profitability of every square meter of retail space.

Any of the above analysis methods can serve the company a good service in the formation of assortment policy. But you should always remember that the development and optimization of the assortment matrix of the store should be complemented by consumer research. Knowing your client and understanding the key segment for the company helps to clearly and clearly position your business. And this, in turn, will partially allow us to answer a significant part of the questions related to the formation of the product range.